SAP to target all markets in a bid to grow by 2010

by Andrew James

By the year 2010 SAP AG is that it would have successfully migrated at least two-thirds of its current R/3 ERP customer base onto its new mySAP ERP 2005 business applications suite; the company also believes that it will be able to triple in that time as it taps into more markets including small and mid-sized businesses.

Speaking earlier this week at SAP's fourth analyst conference in Las Vegas, SAP CEO Henning Kagermann said the company is well on its way to achieving both targets. He pointed to around 500 customers that are already live and running on mySAP ERP 2005 today. Although SAP claim to be seeing around 600 to 700 new ERP "activation keys" per month during the past four months, it seems likely that it will take some time for those keys to result in a live production rollouts.

Overall Kagermann expects SAP's newer SOA products to grow its customer base by over 10,000 customers by 2010, and account for 50% of revenue. At present SAP AG has a customer base of around 35,000 companies.

The company declared that the most efficient way to achieve this migration (from R/3 to mySAP) and growth is not to issue any major new product versions of mySAP, but rather by evolving customers to new functionality gradually over time using so-called "enhancement packages" that are optional and easily implemented as enterprise service upgrades.

New version of SAP All-in-One

Undoubtedly the key to SAP achieving their ambitious growth targets is through deeper penetration of the small business and mid-market sectors – companies with between $100m to $200m in revenue and 100 to 2,499 employees.

This market with be targeted through offerings of newer and more simplified SOA. This basically means re-architecting its All-in-One ERP business applications suite for mid-market firms to leverage the service-enablement design of mySAP ERP 2005.

"We'll be offering our proven enterprise services design to the mid-market with a similar simple consumption model."

A new version of All-in-One is currently in beta testing and is expected to be released to market by mid-2007. The likely branding of the product is All-in-One 2007 and it will be available as either a hosted service, on-premise license or a plug and play appliance.

Kagermann also announced that SAP is preparing a new SOA-based application suite for what he called "the low-end of the mid-market," that will be tailored for businesses with have less than 200 employees.

He expects around 40% of new ERP revenue to come from small businesses and the mid-market by 2010.

Organic growth is the key for SAP

During his keynote address Kagermann said SAP was financially stable and strong, pointing to 11 consecutive years of double digit growth. He also said that SAP is getting used in more core areas of the business beyond its traditional strengths in material management and financials.

"We've shown the market that you can grow organically without having to buy companies."

This was of course an indirect reference to their main business applications rival Oracle Corp which has been acquiring a large numbers of the past 18 months as part of the strategy to achieve market growth.

Like SAP, Oracle is also fleshing out an SOA-based business applications platform around its Fusion initiative. But that is still work in progress and Oracle has the added disadvantage of having to integrate the multiple applications it has acquired over the past two years.

Shai Agassi, president of SAP's product and technology group, weighed in with a comment about Oracle's aggressive acquisition strategy suggesting that best of breed applications like PeopleSoft and was dead.

"Best of breed died a long time ago. Larry [Ellison] bought the bodies," he said at a media luncheon at the conference.

Agassi also explained that SAP's SOA approach is different in that it runs process-driven composite business applications across infrastructure like databases, operating systems and hardware, rather than having applications reside on the middleware (like Fusion does).

SAP asserts that its strategy is to build applications functionality upwards from a core foundation of NetWeaver-driven enterprise-services, internally or via partners, rather than buying it in as Oracle has done.